July 9 Tip of the Week

Salary Basis Rule- Will it Stand?

When the United States Department of Labor issued its new rule regarding the minimum salary required to be exempt from overtime under the administrative, professional or executive classifications, many employers expressed concern at the increase in the minimum salary amount.  Prior to the new rule, to be eligible for one of these exemptions, an individual was required to earn $684 per week ($35,568 per year).  Under the new rule, the minimum salary to qualify for one of these exemptions increased to $844 per week ($43,888 annually) on July 1, 2024 and then, on January 1, 2025, to $1,128 per week ($58,656 annually). 

Due to the significant increase in the minimum salary and the impact on employers, numerous legal challenges were undertaken to prevent the rule from taking effect.  Similar attempts to raise the minimum salary for exemptions occurred in 2016 and 2019 and were subject to successful legal challenges, which delayed any changes to the minimum salary rule.  

The first ruling in a case challenging the most recent changes to the minimum salary amount has been issued.  This decision, which involved the State of Texas and its challenge to the increase in the minimum exempt salary amount, was issued on June 28, 2024.  In that case, a judge in the U.S. District Court for the Eastern District of Texas granted an injunction that was requested by the State of Texas.  This injunction prevents the Department of Labor from enforcing the new rule – but only with respect to employees of the State of Texas.  It does not apply to employees of private employers located in Texas, nor does it have any impact with respect to employees or employers in any other state. 

What does this mean for employers in general?  To some degree, it reflects the uncertainty surrounding the Department of Labor’s ability to enforce the new rule and may indicate another situation where any significant changes in the minimum salary amount may be stalled due to legal challenges.  To date, however, the Department of Labor has not reacted to this decision in Texas and issued a news release on July 1, 2024 reaffirming that the new rule is now in effect. 

For those employers who have been proactive and taken steps to comply with the new rules, you are ahead of the game, but may end up seeing the rules change as the cases challenging the rule wind their way through the courts.  For those who have taken a wait and see attitude, your delay may pay off.  It is too early to tell.  myHRcounsel will continue to monitor the legal developments regarding this rule and keep you up to date on any future rulings and on the Department of Labor’s response to the Texas decision. 

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